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In an incomplete market, including liquidly-traded European options in an investment portfolio could potentially improve the expected terminal utility for a risk-averse investor. However, unlike the Sharpe ratio, which provides a concise…
Extreme values and the tail behavior of probability distributions are essential for quantifying and mitigating risk in complex systems of all kinds. In multivariate settings, accounting for correlations is crucial. Although extreme value…
There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to…
Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…
Several studies on portfolio construction reveal that sensible strategies essentially yield the same results as their nonsensical inverted counterparts; moreover, random portfolios managed by Malkiel's dart-throwing monkey would outperform…
We introduce a framework to study the effective objectives at different time scales of financial market microstructure. The financial market can be regarded as a complex adaptive system, where purposeful agents collectively and…
The gradual patterns that model the complex co-variations of attributes of the form "The more/less X, The more/less Y" play a crucial role in many real world applications where the amount of numerical data to manage is important, this is…
This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many…
Adaptive behavior in volatile environments requires agents to switch among value-control regimes across latent contexts, but maintaining separate preferences, policy biases, and action-confidence parameters for every situation is…
Given two random realized returns on an investment, which is to be preferred? This is a fundamental problem in finance that has no definitive solution except in the case one investment always returns more than the other. In 1952 Markowitz…
The writers propose a mathematical Method for deriving risk weights which describe how a borrower's income, relative to their debt service obligations (serviceability) affects the probability of default of the loan. The Method considers the…
We predict asset returns and measure risk premia using a prominent technique from artificial intelligence -- deep sequence modeling. Because asset returns often exhibit sequential dependence that may not be effectively captured by…
We study the optimal asset allocation problem for a fund manager whose compensation depends on the performance of her portfolio with respect to a benchmark. The objective of the manager is to maximise the expected utility of her final…
A property, or statistical functional, is said to be elicitable if it minimizes expected loss for some loss function. The study of which properties are elicitable sheds light on the capabilities and limitations of point estimation and…
We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with…
Due to the rapid development of science and technology, the importance of imprecise, noisy, and uncertain data is increasing at an exponential rate. Thus, mining patterns in uncertain databases have drawn the attention of researchers.…
The Sharpe ratio is a way to compare the excess returns (over the risk free asset) of portfolios for each unit of volatility that is generated by a portfolio. In this paper we introduce a robust Sharpe ratio portfolio under the assumption…
Gamification has the potential to make significant contributions to financial product delivery, Fintech services, and inclusive growth. The integration of gamification into FinTech applications has shown a positive correlation with the…
We use the Grossman \& Stiglitz (1980) framework to build a reference portfolio for uninformed investors and employ this portfolio to assess the performance of actively managed equity mutual funds. We propose an empirical methodology to…
This study utilised the dynamics of five time-varying models to estimate six essential features of financial return volatility that are relevant for robust risk management. These features include pronounced persistence, mean reversion,…